LAW ON PARTNERSHIP
& DISSOLUTION
ARTICLE
1828
Dissolution, Winding up and Termination
DISSOLUTION
WINDING UP
TERMINATION
It is that point in time when the partners cease to carry on the business together.
It is the process of settling the business or partnership affairs after dissolution.
It is that point in time when all partnership affairs are completely wound up and finally settled.
ARTICLE
1829
Partnership Not Terminated by Dissolution
• Affairs should be liquidated and distribution made to those entitled to the partner’s interest. • The dissolution of a partnership must not be understood to mean its extinguishment. • Dissolution refers to the change in partnership relation and not the actual cessation of the partnership business.
ARTICLE
1830
Causes of Dissolution
Without violation of the agreement between the partners: By the termination of the definite term or particular undertaking specified in the agreement; By the express will of any partner, who must act in good faith, when no definite term or particular is specified;
By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking; By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners;
ARTICLE
1830
Causes of Dissolution
In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time • Dissolution may be for any cause or reason and power of dissolution always exist. • The withdrawing partner is liable for damages for unjustified dissolution.
ARTICLE
1830
Causes of Dissolution
By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership
A partnership must have a lawful object or purpose.
ARTICLE
1830
Causes of Dissolution
Loss of Specific Thing
Loss before Delivery
Loss after Delivery
If the specific thing to be contributed by a partner is lost before delivery, the partnership is dissolved.
If the loss occurred after the delivery of the thing promised, then partnership is not dissolved.
Loss where only use or enjoyment is contributed The loss of this thing before or after the delivery dissolves the partnership.
ARTICLE
1830
Causes of Dissolution
By the Death of any Partner
ARTICLE
1830
Causes of Dissolution
By the Insolvency of any Partner or of the Partnership
The insolvency of a partner subjects his interest in the partnership to the right of is creditors and makes it impossible for him to satisfy partnership obligations to its creditors.
ARTICLE
1830
Causes of Dissolution
By civil interdiction of any partner A convicted person suffering from the accessory penalty of civil interdiction cannot validly give consent as his capacity is limited thereby
By decree of court under the following Article (1700a and 1701a)
ARTICLE
1831
Grounds for Dissolution
On application by a partner INSANITY
OTHER CIRCUMSTANCES
BUSINESS CAN BE CARRIED ONLY AT LOSS
INCAPACITY
MISCONDUCT AND PERSISTENT BREACH OF PARTNERSHIP AGREEMENT
ARTICLE
1831
Grounds for Dissolution
On application by a purchaser of a partner’s interest
ARTICLE
1832
EFFECT OF DISSOLUTION ON AUTHORITY OF PARTNER
GENERAL RULE QUALIFICATION TO THE RULE In so far as the partners themselves are concerned. With respect to third persons.
ARTICLE
1833
AUTHORITY OF PARTNERS, AS AMONG THEMSELVES, TO ACT FOR THE PARTNERSHIP
The cause of the dissolution is the act of a partner and the acting partner had knowledge of such dissolution.
The cause of the dissolution is the death or insolvency of a partner and the acting partner had knowledge or notice of the death or insolvency.
ARTICLE
1834
Power of partner to bind dissolved partnership to third persons
By an act appropriate for winding up partnership affairs of completing transactions unfinished at dissolution;
ARTICLE
1834
Power of partner to bind dissolved partnership to third persons By any transaction which would bind the partnership if dissolution had not taken place, provided the other party to the transaction:
(a) Had extended credit to the partnership prior to dissolution and had knowledge or notice of the dissolution (b) Though he had not so extended credit, had nevertheless known of the partnership prior to dissolution, and, having no knowledge or notice of dissolution, the fact of dissolution had not been advertised in a newspaper of general circulation in the place (or in each place if more that one) at which the partnership was regularly carried on.
ARTICLE
1834
Notice of dissolution to partners
• As to persons who extended credit to partnership to dissolution • As to persons who had known of partnership’s existence
• Where acting partner has no authority to wind up partnership affairs • Where acting partner has become insolvent
ARTICLE
1835
Effect of dissolution on partner’s existing liability
The dissolution of a partnership does not of itself discharge the existing liability of a partner.
A partner may be relieved from all existing liabilities upon dissolution only by an agreement to that effect between himself, the partnership creditor and the other partners.
ARTICLE
1835
Liability of estate of deceased partner
The individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner with preference to his individual creditors.
ARTICLE
1836
MANNER OF WINDING UP
ARTICLE
1836
PERSONS AUTHORIZED TO WIND UP
ARTICLE
1837
Right of partner to application of partnership property on dissolution
Dissolution without contravention of the partnership agreement. Dissolution in contravention of the partnership agreement. A. Rights of partner who has not caused the dissolution wrongfully. B. Rights of partner who has caused the dissolution wrongfully.
Right of Partner to Rescind 1838 Contract of Partnership
ARTICLE
Inducement of an individual to become a partner by means of fraud or misrepresentation makes the partnership contract voidable and annullable. INJURED PARTNER IS ENTITLED TO RESTITTUTION
Continuous existence of partnership. DEFRAUDED PARTNER LIABLE FOR ALL OBLIGATIONS TO THIRD PERSONS.
ARTICLE
1838
Right of Injured Partner where Partnership Contract Rescinded
Right of a lien on, or retention of, the surplus of partnership property after satisfying partnership liabilities for any sum of money paid or contributed by him.
Right to stand in the place of the creditors of the partnership after payment of partnership liabilities Right of indemnification by the guilty partner against all debts and liabilities of the partnership.
ARTICLE
1839
Rules in Settling Accounts between Partners after Dissolution
ASSETS OF THE PARTNERSHIP
Partnership Property
Contributions of Partners
ARTICLE
1839
Rules in Settling Accounts between Partners after Dissolution
ORDER OF APPLICATION OF THE ASSETS Partnership Creditors
Loans to Partners Return of capital contributions Share in profits
ARTICLE
Rules in Settling Accounts between Partners after Dissolution
1839 Right of a partner where assets insufficient Capital Loss of a Partner Enforce contributions of the Partners
All partners contributed
Only few partners contribute
Sue non-paying partners for indemnification.
ARTICLE
1839
Rules in Settling Accounts between Partners after Dissolution
Liability of deceased partner’s individual property Only liabilities of the partnership incurred while the deceased partner is a partner will be attached to individual property as his share.
Liabilities covered by individual property of a deceased partner
ARTICLE
1839
Rules in Settling Accounts between Partners after Dissolution
PRIORITY TO PAYMENT OF PARTNERSHIP CREDITORS / PARTNER’S CREDITORS
PARTNERSHIP PROPERTY
INDIVIDUAL PROPERTY
PARTNERSHIP CREDITORS
INDIVIDUAL CREDITORS
ARTICLE
1839
Rules in Settling Accounts between Partners after Dissolution
DISTRIBUTION OF PROPERTY OF INSOLVENT PARTNER
SEPARATE CREDITORS PARTNERSHIP CREDITORS CONTRIBUTION TO PARTNERS
Dissolution of Partnership 1840 by Change in Membership ARTICLE
ADMISSION OF NEW PARTNER RETIREMENT, DEATH, WITHDRAWAL OR EXPULSION OF A PARTNER PARTNER’S ASSIGNMENT OF RIGHTS TO SOLE REMAINING PARTNER ALL PARTNERS’ ASSIGNMENT OF RIGHTS TO THIRD PERSONS
ARTICLE
1840
DISSOLVED PARTNERSHIP CREDITORS
Rights of Creditors of Dissolved Partnership which is Continued
NEW PARTNERSHIP CREDITORS
CONTINUING PARTNERSHIP CREDITORS
ARTICLE
1840
Liability of Persons Continuing Business of Dissolved Partnerships The liability of the new or incoming partners shall be satisfied out of partnership property only unless there is stipulation to the contrary. Obligations to the debts of the dissolved partnership of one or more third persons who continue the partnership shall apply only when the continuing partners promise to pay such.
ARTICLE
1841
Rights of Retiring or of Legal Representative of Deceased Partner when Business is Deceased
To have the value of the interest of the retiring partner or deceased partner in the partnership ascertained as of the date of dissolution.
To receive thereafter, as an ordinary creditor, an amount equal to the value of his share in the dissolved partnership with interest, or, at his option, in lieu of interest , the profits attributable to the use of his right.
Partner’s Right to Account 1842 of His Interest
ARTICLE
Accrual Right The right to demand an accounting of the value of his interest accrues to any partners or his legal representative after dissolution in the absence of an agreement to the contrary.
Partner’s Right to Account 1842 of His Interest
ARTICLE
Person liable to render an account The right of a partner or the one who represents him as owner of his interest to an account to a payment of the amount of his interest, may be exercised as against: 1. The winding up partner 2. The surviving partner 3. The person or partnership continuing the business.
